Thursday, 31 January 2013

Zimbabwe strapped for cash or just another case of Contextomy?

How can a country’s Minister of Finance, even Zimbabwe’s, announce that they have only £138 left in their public accounts?

Zimbabwe’s money man, Tendai Biti has been reported saying that the country only had £138 left in its public account last week after paying its Civil Servants. However the following day some $30m of revenue has been paid in.

He later responded to BBC Africa’s Lewis Machipisa that his comment had been deliberately taken out of context and that “you journalists are mischievous and malicious.” The point he was trying to make apparently is that the government doesn’t have the funds to finance the rather suspect general election or the referendum on the constitution. He used the above reference in a metaphorical sense. Zimbabwe needs around £127m to pay for the democratic practices.

When you look at Zimbabwe’s economic track record, from the ‘bread basket’ of Africa, to hyperinflation, to today, such assessments of Zimbabwe’s finances in dire straits are not unimaginable. It was only four years ago in 2009 that the Reserve Bank of Zimbabwe introduced a Z$100 trillion note equivalent at the time to £20.

Mr Biti’s claim that his comment was taken out of context and manipulated by journalists is not an isolated complaint. It has been a running theme in complaints about journalistic practice everywhere. The practice of using a quote out of context is sometimes referred to as contextomy (the practice of misquoting someone by shortening the quotation or by leaving out surrounding words or sentences that would place the quotation in context).

However, even if his quote was taken out of context, we have to remember that there’s no smoke without fire.


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Friday, 25 January 2013

Abchat Weekly Wrap Up: Is this the winter of discontent?

The final three months of 2012 saw a shrink in the UK’s GDP. The Office for National Statistics claim the UK’s output shrank by 0.3% in Q4 2012. This is a preliminary estimate, and could therefore be liable to change in the months ahead. Having said that it is highly likely that the ONS’s estimates are accurate, so what does this mean for the UK economy looking forward for Q1 2013? The traditional week of snow which we Brits have become accustomed to hit us reasonably hard over the last 10 days, and now Britain prepares for the economy to slide into the dreaded triple-dip recession.

The main area for concern in Q4 2012 was the production industries, which decreased by 1.8% of the three months. On a brighter note, construction output rose by 0.3% which is some long awaited encouraging news for the sector. The services industry, which is the dominant driver of the UK economy, experienced a flat quarter.

The 0.9% expansion the UK experienced in Q3 as a result of hosting the Olympic Games now seems a distant memory – and the country now stares down the barrel of a triple barrelled shot gun! Economists are putting this potential slump for Q1 2013 down to the snow; heaven forbid if this country ever had any sustained periods of snow fall. Let’s hope February is one of the hottest months since record began!

Howard Archer, IHS Global Insight chief, UK hammered the point home: “With the economy in a fragile state, even relatively limited disruption from snow and freezing conditions could very well be enough to tip the balance towards modest GDP contraction rather than modest growth in the first quarter of this year.”

Apple and its investors suffered another blow this week as the Company falls victim to own success. The share price crashed by 12% - its biggest percentage in four years, as analysts from more than 20 banks slashed their price targets. The responses emerged amidst fears of Apple’s slowing product pipeline as well as their own ‘catch-22’, whereby the high sales have generated market saturation.

The London Stock Exchange released encouraging figures which suggest that the economy is indeed experiencing a positive turn. The Exchange has acknowledged several good indications of new market listings as well as an increase in equity, bond and derivatives trading.

The Moscow Exchange, Russia’s largest bourse, confirmed plans to go ahead with an IPO. After many Russian companies dismissed the exchange for a London Listing, the Group hopes the exclusive listing on its own platform will stem the current exodus and turn Moscow into an international financial centre.

EasyJet flies high off the back of the recession. The Company reported revenue boosts of 9.2% in the last quarter as they capitalise on increased business passenger numbers as companies cut travel costs, and competitor capacity reductions. Shares soared to their highest level since the company floated in 2000.

Bank of America warned of ‘bond crash’ alert this week, comparable to that experienced in 1994. With the world economy seeming to be at the start of a fresh cycle, and investors reverting back to financial market investments, bond yields face a threatening surge with potential drastic impact on the $800bn poured into the ‘safe store’ bond market since 2008.

Stock Watch: Long-term investors look to capitalise on “Agflation” following a year of droughts which has pushed up the price of agricultural commodities. The sector, which has started to differentiate itself as a unique asset class, is attracting fund managers looking to diversify their portfolios. Moreover, as many banks are failing to lend money, it is an industry starving for cash and farmland offers the same type of revenue stream as long-term bond yields.

This week we entertained the lovely team from Daniel Stewart over drinks and canapés to talk about where our current interests overlap.

Abchaps held a strategy day where the whole team got together to brainstorm ways that we could make Abchurch even better than it already is.

Bozzy joined Baker Tilly for their brilliant Burns Supper.

Our CIPR Committee members joined the Corporate and Financial Group Committee meeting, where activities and events to support its members are proposed.

The alleged ‘worst job in PR’ – otherwise known as head of comms for Ryannair – has gone to Robin Kiely who has been promoted from comms manager for the budget airline.

We are excited that on Monday we have an Apprentice joining the team. This has come about through the Evening Standard campaign and City Gateway’s amazing work to support youngsters getting into work.

We learned this week that old Abchum Ollie Rigby has been appointed CFO of AIM-listed Magnolia Petroleum.

Baker Tilly has appointed Paul Merris to financial reporting advisory partner, specialising in international finance reporting standards and UK accountancy practices.

Dragan Trajkov has joined the oil and gas research team at Westhouse Securities. He previously covered Africa and Middle East oil and gas companies at Renaissance Capital.

A number of FT Journalists will be looking for a new home after Lionel Barber announced plans to move to a ‘digital-first’ strategy and reduce headcount at the paper. In an email to all staff, he said he also plans to bring in around ten new digital specialists.

"Agriflaton" - Increase in food prices as a result of increased demand from consumptions as well as for energy production

If you have no plans tonight and have that Friday feeling, look out for locations in the Capital which will be celebrating Burns Night! Green’s in St James’s and the City is offering an upmarket celebration with £80 (whiskey included) set menu. On a cheaper note the York & Albany pub in Camden Town is putting on a £21 set menu including haggis, Scottish Salmon and whiskey galore.

Check out the Australian Open Men’s Final on Sunday morning with Britain’s Andy Murray looking to make it Grand Slam number two, he will be taking on World Number 1 Novak Djokovic.

If you fancy a couple of hours of culture, check out the Alexander the Great exhibition at the British Museum, which will cost a meagre £5.

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Thursday, 24 January 2013

More data storage than you could ever need?

Adam Michael

When I first built a PC, just over a decade ago, I installed a 180GB hard drive. “That’s more data storage than you’ll ever need,” the PC components specialist informed me.

And that’s precisely what I thought when reading about data storage in DNA; research from Nick Goldman and his team at the European Bioinformatics Institute published in today’s Nature. The approach would enable storing the data from a million hard drives, in just a few grams of DNA. Surely this is more storage than you’ll ever need?

But, rather than rely on gut instinct, I decided a quick recap on the capacity of data storage devices over the years would be a more rigorous approach to forming an opinion.

So, here’s a quick flashback through time, looking at data storage devices accessible to average consumers. At the start of the 1970s the first floppy disk (from IBM) stored 79 kilobytes (79kB) – admittedly this is a little shaky as a starting point, as no-one had computers at this point in time, but I needed to start somewhere.

By the end of the 1970s and early 1980s, we had progressed to the compact cassette, widely used for all home computers, with a 90 minute tape storing 660kB. Then through the 1980s the floppy disk became ubiquitous, and in its various forms progressed to 1.44 Megabytes (MB). We then moved to the compact disc, which again evolved over time, and in 1997 the first CD-RW (the read-write version) came into play, which could store 860MB. The CD rapidly became the DVD, the read-write version holding 1.5 Gigabytes (GB) and read-only version storing 4.7GB

Thus, in 2001 I when installed my 180GB hard drive, I could have stored my entire library of films and music in one small partition of the drive. Surely I was never going to fill this!

But, as we moved further into the new millennium solid state memory started to take hold, starting small with just 4GB, but very quickly progressing to 64GB; this memory is at the core of every smartphone, tablet, digital camera, and top end laptop. So now, just a few uploads from a camera with a full memory, a sync with my laptop, and a file exchange with the tablet and the 180GB hard drive is bursting at the seams.   

The pace didn’t stop there though, in 2009 Sony and SanDisk launched a 2 Terabyte (TB) solid state memory stick; and today, for less than £100 you can buy a 3TB hard drive for a PC.

Nick Goldman and his team estimate that a gram of their DNA storage system could hold around 2 PetaBytes (PB) which is 2000TB. Wow! But, history tells us, very clearly, that we need a 1000-fold increase in data storage every decade.

So, is DNA data storage more than you could ever need? Apparently not, indeed, it appears to have arrived just in time.

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Five minute Abchat with Richard Gill, Editorial Director for

Richard Gill is the Editorial Director heading up the t1ps team. He started writing for the AIM & PLUS Newsletter in 2007 before becoming its editor, along with sister publication Small Cap Shares. His investment philosophy is focused on cheap growth companies, but with a focus on solid cash generative growth businesses offering a dividend yield. He holds the Chartered Financial Analyst (CFA) designation, and was named PLUS Markets Financial Writer of the Year in 2008. Richard is an Associate Member of the Chartered Institute for Securities and Investment, a member of the CFA Society of the UK and a regular member of the CFA Institute.

What did you want to be when you grew up?
Early on probably a footballer and in my teens a rock star. I haven’t given up on either yet! When I grow up a bit more I would like to be Chairman of Bradford City.

Describe your role in ten words or less (if that’s possible!):
Researching and advising private investors on which equities to buy.

What is the most interesting thing about your work?
Researching companies and meeting the directors and entrepreneurs behind them are a highlight. Having a one to one session with successful people like Nick Robertson of Asos can be truly inspirational. Industry lunches and parties can also throw out some interesting situations.

What three things do you look for when tipping a company?
There are literally hundreds of things to cover when looking for decent companies to recommend. But if I had to name three… I think in the current environment a company needs to have a strong enough financial position to fund its plans. Given the difficulty raising funds, private investors can often be the worst hit if firms have to raise money. Growth is also a key factor, if a company can’t grow its revenues and profits then the shares are not going to go up! Finally, the price has to be right. The best run company in the world won’t be recommended by us if the shares look over-valued.

Is there a common misconception about share tipsters?
Tipsters are often seen as the finance equivalent of dodgy second hand car sales men – and for some that is certainly true. However, at t1ps we are regulated by the Financial Services Authority and our analysts all have relevant finance qualifications including the IMC (Investment Management Certificate) and Chartered Financial Analyst (CFA) designation. Also, all our chief analysts are approved by the FSA. Because of this we think we are bringing credibility into the profession which others just don’t have.

What developments do you expect to see in the next twelve months?
Everyone has been expecting (or at least hoping) for a recovery in the small cap equity markets for at least five years now. But with no major recovery in the wider economy expected I think 2013 is going to be pretty much the same as 2012. IPOs will remain thin on the ground, fundraising will remain difficult for smaller firms and more brokers & advisory firms will either merge or go bust. The possibility of the government allowing AIM shares into a stocks & shares ISA might give the markets a small boost. I also expect Bradford City to make at least one visit to Wembley.

In which emerging market do you see the best potential in 2013?
Mexico is one emerging market which has been relatively over-looked by investors. The country has its political and drug issues and is not as “sexy” as the booming Chinese and Brazilian economies. However, the country has recently been benefiting from rising wages in China, with global manufacturers looking to take advantage of Mexico’s low labour costs. This has combined with high fuel costs causing trading partner the US to import more goods from Mexico, rather than from further afield.

If I wasn’t talking to you now, what would you be doing?
Looking for new investment ideas or organising a lunch.

Thank you Richard!

Follow Richard on Twitter @RichardLeoGill

Friday, 18 January 2013

Abchat Weekly Wrap Up: The Questionable Case Study of PR Perfection

This week, Lance Armstrong gave a warts and all interview with Oprah Winfrey on US TV to admit to the World that he indeed used performance enhancing drugs to help bring home his seven Tour de France titles. The disgraced former champion’s admission of his guilt is the most recent, and the most momentous of all of the sporting confessions. Other famous sporting confessions include Olympic sprint cheats Ben Johnson and Britain’s very own, Dwain Chambers, former US track and field Olympic Champion, Marion Jones and of course, Lothario extraordinaire, Tiger Woods. All of these once great athletes have used different tactics in front of the camera admitting their guilt, and from a PR perspective it is very interesting.

During a televised statement, not dissimilar to that of a statesman or politician, Tiger Woods aggressively attacked his actions, of which there were many as if he was chastising himself for what he had done. Later on Tiger credited his serial infidelity to losing track of Buddhism; good answer Tiger! It is safe to say the former number 1 golfer in the World, has all but put his misdemeanours behind him and can get back to his day job of playing golf – but strangely enough he has not won a major title since the revelations about his over zealous libido.

Now the job to turn around Lance Armstrong’s reputation is going to be a lengthy, extremely difficult and potentially futile task – and whichever organistion or individual has this responsibility, good luck to you! In Lance’s first public appearance since the doping allegations fully came to fruition in August 2012, when he was given a lifetime ban by the United States Anti-Doping Agency, he finally admitted to cheating. There was no way of getting around it.

Lance’s PR advisers could not have picked a more perfect TV host to interview him, Oprah, whilst not a big celeb in the UK; in the United States is the nation’s surrogate mother! Oprah’s motherly and caring manner provided the perfect balance to Armstrong’s villainous demeanor. If any interviewer was going to extract any sympathy for Armstrong, it was going to be Oprah.

So his PR advisers picked the right journalist, now the next and possibly more crucial decision to make was what on earth is Lance going to say? Well, as Oprah commented post interview “he answered his questions in a way that he was ready.” Whatever he was going to say, in true crisis management style, Armstrong had been prepped and rehearsed well in advance by his PR team. His use of language was quite interesting to observe, most notably when he was talking about finally coming clean, he said “it is too late for probably most people, and that’s my fault” using an adverb like probably and a noun like most allow for that small minority of sympathisers. He also answered some questions with “I’m not sure if this is an acceptable answer”, almost portraying the victim, again perfect for the maternal Oprah.

Lance’s reference to his cancer was however a bit cheap, and whichever PR adviser told him to say that must have their brain tested. The reason Armstrong gave for taking performance enhancing drugs, and cheating was because whilst battling against cancer he developed a win at all costs mentality, and therefore why he was prepared to cheat in order to win. Now you can see the logic behind this decision, mainly because the one area he performs reasonably well in, in terms of public opinion, is the tremendous work he has done raising money and awareness for cancer. It was obviously a tactic to remind the public of the suffering he had to endure years ago, to remind the public of all the good work he has achieved for cancer awareness and to get some of them back on side. I however feel this will have a negative effect, as it is such blatant PR spin, the public and media are (and have not) going to buy it, and also it is potentially deeply offensive to any cancer sufferers and their families.

He has come clean and made the first step towards clearing his name, but of all the sporting super villains out there, Lance Armstrong is bad guy number one. His representatives and PR people are going to have to do a lot more and think a lot harder to win round the international press and people who feel personally let down by someone who only a year ago was a complete and utter hero.

Rio Tinto chief Tom Albanese quits following a £9bn writedown of its assets. The Company’s poor performance has been largely blamed on its disastrous purchase of Canada’s Alcan in 2007. Albanese is to be replaced by Sam Walse, head of Rio’s iron ore division – the biggest and most profitable of its businesses.

Facebook unveiled ‘Graph Search’, a new friends-based search engine, in an attempt to wean users away from Google and allow users to get information on Facebook. The tool marks the first major product launch since its questionable IPO last May, with Mark Zuckerberg claiming it will act as the site’s “third pillar” after Timeline and News Feed.

HMV and Blockbuster join Jessops in the retail casualty list of 2013 as they both collapsed into administration this week. To add more gloom to the equation, a report by Begbies Traynor has identified an additional 14 retailers on the “critical watchlist”.

However, on the contrary, Dixons, Primark and ASOS are bucking the retail trend, with Primark in particular adding a glimmer of hope to the future of the British high street. The three companies all celebrated festive success, with Asos reporting an impressive 41% rise in December sales.

Jaguar/ Landrover further bolstered its good newsflow and growth potential as they confirmed the creation of 800 new jobs at its plant in Solihull. The Company seems to be going from strength to strength, with 2012 marking record sales and an impressive 30% increase.

STOCKWATCH: James Moore of The Independent has analysed some of the recent trading statements, which in turn has left him speculating the nation’s pub companies. The shift of many Brits from posh restaurants to settling in at the local jaunt has translated into some solid performances across the sector. With both Spirit and Wetherspoon’s getting good mentions, Greene King is one to hold for people looking to invest, as it looks to be on a roll.

New year celebrations are continuing in Russia, and our Resources team joined in the festivities at law firm Norton Rose to mark the Russian Old New Year.

We hosted two excellent sector focused Market Lunches this week. One had an Environmental theme and the other was China, with guests who are specialists in those areas.

This weekend we will be taking a couple of Abchums to watch Chelsea play Arsenal. Lets hope the snow on the pitch has melted by then!

This week Richard Killingbeck has received formal FSA approval to take the reigns at WH Ireland. He is appointed CEO with immediate effect.

John Dean and Robert Morton have joined the industry specialist group at Espirito Santo Investment Bank. The analysts join from Jefferies International and Investec.

Smith and Williamson has appointed Harish Dass as an associate director in its London tax and business services division. Dass joins from Grant Thornton.

Law firm Bird and Bird has appointed Brett Hailey as a partner in the London office and international aviation sector group.

John Gilbert has joined Pinsent Masons as part of the natural resources team. He spent the last five years in the litigation group of the legal team at BP.

"Dawn Raid" – An investor or company instructs a broker to buy all the shares available in another company as soon as the stock market opens, usually before the company knows that it is the target. The aim is usually to acquire a significant stake in the company with the view to making a takeover bid.

If you’re a cycling enthusiast, or have had your interest spurred by Lance Armstrong’s admission this week, take a topical trip to The London Bike Show, January 17th – 20th at the ExCel London.

Shelter from the snow with a visit to the National Portrait Gallery to see the first official portrait of The Duchess of Cambridge, painted by Paul Emsley.

If you need your cockles warming, why not tackle the Man vs Food Hot Wing Challenge at The Elk Bar, Fulham: 30 wings covered in their specialty house sauce, red cabbage coleslaw, fries & blue cheese sauce and three shots of chilli infused El Jimador Tequila.

Follow us on Twitter @AbchurchComms

Wednesday, 16 January 2013

Expect the Chinese economy to rebound in 2013

After a sharp economic slowdown through much of 2012, China’s economy is growing again.  Whilst the world’s second largest economy is not expected to return to double-digit growth, the predictions of economists are welcome news in a financial world assailed by the eurozone debt crisis and lacklustre recovery in the United States.

After seven consecutive quarters of slowing growth, China's GDP is forecast to rise by 8.0% in 2013, according to a group of economists recently surveyed by the Association for Financial Professionals. The figures would outpace the government's 7.5% growth target for 2012 but are well below the 9.3% recorded in 2011 and 10.4% in 2010. [1]

Sustaining growth is essential for China’s communist leaders, whose claim on authority largely comes from the country’s more liberal economic policies, which have helped lift hundreds of millions of people out of poverty over the past thirty years.

The rebound comes as China officially implements a once-in-a-decade leadership change in March 2013 when Xi Jinping, who was named the next Communist Party chief in November 2012, takes over as president and Li Keqiang becomes premier, in charge of day-to-day administration.  Xi, in his first public appearance after being selected to lead the Party, appeared to address the rich-poor divide, and said China’s citizens “want their children to have sound growth, have good jobs and lead a more enjoyable life. To meet their desire for a happy life is our mission.”

China’s startling economic transformation has long been fuelled by considerable state investment in infrastructure such as railways, airports, bridges and buildings, as well as an emphasis on manufacturing and exports.  But the country is now trying to recreate the past economic drivers of Western countries, promoting demand from within its own increasingly affluent consumers in order to grow the economy. In addition, the Communist Party claims it recognises the need to include the more unfortunate members of society who have not shared in the boom of the noughties as the class gap opens up.

Stronger monthly data during the fourth quarter, including industrial output and retail sales, has increased optimism that the worst is behind China, as did new single-month highs for imports and exports in December 2012. The economy however, still faces challenges such as overcapacity and reliance on investment-driven growth among other unresolved structural problems, and economists are being warned against over optimism, as stated by Yao Wei economist at Société Génerale in the China Post. [2]

China’s economy averaged GDP growth of 10% in the decade to 2010. A slower rate of 7.0% to 8.0% is seen by economists as part of China’s natural economic evolution as spending on projects such as transport and utility networks is reined in.

However, according to Mark Williams, Chief Asia Economist at Capital Economics “market optimism over China’s prospects risks being disappointed if in 2013 the recovery remains centred on infrastructure and real-estate investment rather than consumption.” [3]

A host of Chinese economic indicators, including the GDP, are set for release this week and the outlook remains optimistic amongst investors. Analysts widely forecast the data to be positive, underscoring the general speculation that the world's second largest economy is mostly out of the woods.


[1] Recent survey conducted by Association for Financial Professionals
[3] Mark Williams, Chief Asia Economist at Capital Economics

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Life sciences: The UK needs to connect the dots

The recent Genesis conference in London, hosted a weighty debate around whether the UK ecosystem is conducive to a strong life sciences sector. It scoped out the science, industry, political environment and public policy, human talent, access to capital, and nurturing entrepreneurship.

A panel of life science industrialists and practitioners presented one case, a panel of politicos and infrastructural enablers presented another. And through the wizardry of wireless voting buttons, the audience could express an electronic show of hands – instantaneously projected to the screens.

So, is the UK ecosystem conducive to life sciences? Well, the audience was split down the middle, 50:50 (50.9:49.1 to be precise).

Hurdles to market entry

Kicking off the discussion and pointing to strengths in the UK, Shaun Grady – VP Strategic Partnering and Business Development at AstraZeneca (AZN) – highlighted government initiatives that have provided financial support for life sciences. These included Regional Growth Funds, patent and R&D tax incentives, and funding of research councils.

However, Shaun also noted that AZN (which invests £1.6bn in R&D in the UK) is looking globally for a competitive environment in which to operate. His particular concern with the UK is the reimbursement of new drugs, both on price and uptake. 

“When boards are making decisions about where to put their next research dollars, the general commercial climate, and how they feel that innovation is welcomed in a particular territory is key,” he said; adding that in the UK, having achieved regulatory approval and NICE recommendation, there is still no guarantee that a drug will be taken up in the NHS. 

Following on from this, Greer Deal, Global Regulatory Services (a consultancy specialising in product regulatory approval) pointed to the time taken for product approvals in the UK as another issue. “When you submit a dossier for approval, the MHRA [the UK drug approval body] must turn around their assessment in 210 days. However, if there is a question – the clock stops – so this takes regulatory approval in to years.” Speed is important and to be globally competitive, Greer believes this needs to be brought down to 12 – 18 months.

Healthy new shoots and strong roots

Despite these factors, Glen Crocker CEO of UK bioincubator network BioCity, believes the sector is growing fast. He notes that where Pharma has left the UK, the sites are rapidly filling with new, high-growth companies. Glen believes these small companies will be the future engines of the sector, with the role of big Pharma increasingly moving to late stage clinical trials, regulatory approval, and sales & marketing.

With Pharma companies needing to in-license products and technologies to fill their pipelines Lubor Gaal, Head of Europe Transactions at Bristol-Myers Squibb, said that it is excellent research that attracts the Pharma industry to a country. “At BMS, we are agnostic about country – we go wherever there is good medical research.” He noted that this year China has, for the first time, published the most peer-reviewed research in life sciences.

On the basis of research, the UK is exceptionally well-poised, as agreed by all parties; it is recognised globally as centre of research excellence. However, Lubor noted that he was not convinced that the UK systematically tracked all its research, and as such it is hard to know exactly what commercial potential is out there.

And this sentiment was re-enforced by David Phillips, a Partner at SROne, GlaxoSmithKline’s venture capital wing. “We have a whole team searching for disruptive technologies from the UK, but it’s a case man-power to track these down.” This means that exciting and commercially valuable technologies could easily be missed if small companies are not ensuring they are visible.

Building on the facets of UK expertise, Prof Sir Robert Lechler, Executive Director of King’s Health Partners, pitched that the UK is a very attractive place to conduct experimental medicine and early stage trials. Sir Robert also pointed out that alongside the world-beating clinical investigators, the NHS is an immense resource for identifying relevant patients for clinical trials. “We have great science and punch way above our weight in terms of biomedical research – we now also have fantastic experimental facilities in the UK.”

Such infrastructural faculties have not come about by chance. Indeed, Mark Treherne, from the Life Science Investment Organisation – part of the UKTI – said that the government has put forward £992m over recent years to support the infrastructure for clinical trials and experimental medicine.

Gone too far, or the wrong direction?

While acknowledging the success of government initiatives to create research excellence, the serial biotech entrepreneur Ken Powell noted there’s almost an excess of talented researchers.

“The government has invested vast sums in life sciences to create this research talent – but the bulk of the profits are going abroad,” he said. Ken then cited the example of Cambridge Antibody Technology, whose technology identified a candidate that went on to become the world’s biggest selling drug. Humira, which treats a wide variety of disorders related to the immune system, sold circa $4bn in the US over the last four quarters, but the profits went to Abbott Laboratories in the US.

Following on from this, Ken asked the question: “Where is the management?” In doing so he pointed to the fact that there are surprisingly few serial entrepreneurs that stay in the UK, thus there is a lack of commercial nous to establish the next waves of biotech companies.

Taking this thread further, Mike Ward, Editor-in-Chief of leading industry publication SCRIP Intelligence, noted that continental Europe and West Coast US is populated with serial entrepreneurs from the UK suggesting that these people clearly think the UK is hostile – or at least not the most favourable.

The potential fix

Andrew Pulkrabek of UK/US venture capital firm LifeScience Ventures asked the cutting question: “Is the UK operating in silos?”

Describing the ecosystem in such US life science hotspots as Boston, San Francisco, Research Triangle Park, Andrew noted that there is a highly connected ecosystem, from leading edge research and technology development with angel investors, seed stage and later stage investors. Additionally, there is infrastructure, management, and mentors who have been through the process before.

He concluded: “I don’t get the impression that all the elements don’t exist here, it’s just that they are not necessarily connected.”

And here I believe our US cousin has struck the nail on the head. There can be no doubt about the UK having the essential elements to make life sciences flourish in the UK – world-class research, a supportive government, premier capital markets, and the deep-rooted pharmaceutical industry. However, individual regions within the UK have forever battled to be the best in the country – North vs. South, Scotland vs. England, or the age old varsity match between Oxford and Cambridge – rather than present a single, unified face.

If you take Route 101, the scenic coast road, from San Francisco to San Diego, you’ll cover around 550 miles. That stretch of California is the world’s biggest biotech hub. The run from the UK’s most northern university in Aberdeen, down to the most southerly, Plymouth, is just shy of 600 miles – so, on a global scale, the UK is a single place that would benefit from a little more cohesion.

You can watch the plenary debate in full here.  


Follow us on Twitter @AbchurchComms

Friday, 11 January 2013

Abchat Weekly Wrap Up: Is it time to stand alone from Europe?

Rather than leave the EU altogether, David Cameron has expressed his desire for a looser relationship with the EU and the repatriation of powers to Britain. He feels there is a need to redefine the relationship, especially surrounding moves towards further integration by countries using the euro. However, despite his suggestion for “fresh consent” at any new deal, some MPs want him to commit further with the ’in-out vote’.

The responses this week from both outside and inside the EU were weary and negative towards any exit / change. Shedding light on the ‘within the EU’ opinion included Mr Gilmore, Ireland’s foreign minister. He warned that any special settlement between Britain and the EU would lead to a free for all that could break-up the block: “The EU is not an a la carte menu.” Additionally, Gunther Krichbaum, Chairman of the Bundestag’s European Affairs Committee, went as far as saying that “losing the single market for the UK would be an economic disaster”, whilst also damaging relations with Washington for both London and Brussels.

On Wednesday the Obama administration publicly outlined its growing concern. The so called “special relationship” is, in American eyes, best served by the UK remaining at the Heart of Europe. Philip Gordon, assistant secretary for European affairs said, “We welcome an outward-looking EU with Britain in it” and that we risk “turning inward” over an EU referendum.

Within Britain there is concern from Business leaders; including Sir Richard Branson. He warned that Mr Cameron would fail if he sought a “wholesale renegotiation” of Britain’s membership, heightening the risks of a No Vote. However, Herman Von Rompuy did not completely rule out any treaty change in the future.

We wait with great expectation; the prime minister’s planned up-coming speech in the Netherlands within the next two weeks.

In the Emerging Markets, Japan received a $116bn stimulus package from its government to help boost growth and the economy.

The first retail casualty of the New Year emerged this week as Jessops announces it has collapsed into administration. The demise of the high-street camera chain will put 2,000 jobs at risk, although its administrators PwC have immediately sought a buyer for the 192 stores.

In healthcare, Galapagos delivered its fifth pre-clinical trial candidate to its joint venture partner GlaxoSmithKline. The potential drug seeks to help fight immuno-inflammatory diseases, and could result in the Belgian company receiving more than €200m.

The government bond market has responded significantly to the news that the Office for National Statistics body has shelved plans to alter the Retail Price Index, which acts as reference for about £300bn of gilts. The unexpected ruling triggered the biggest one day rally to the inflation-linked gild market since 1987.

STOCKWATCH: Tesco shed some much needed positive light following its profit warning last year. The Group reported its best sales figures for three years and a 1.8% growth in like-for-like sales figures in the 6 weeks to January 5. This sales victory helped restore investor confidence in its turnaround strategy and shares in the company rose by 7.7p to 356.85p.

Abchaps kicked off the year with two great Market Lunches this week, with one focusing on Life Sciences. Positive outlooks for 2013 seemed unanimous, in particular for Emerging Markets and Life Sciences.

Charles Stanley has appointed their transport analyst Douglas McNeill as investment director its new direct-to-client investment service. He will transfer to Charles Stanley Direct from Charles Stanley Securities, the company’s institutional division. Prior to joining Charles Stanley in 2012, McNeill held positions at ABN Amro and Barclays de Zoete Wedd. In his new position, McNeill will take charge of all equity research within Charles Stanley Direct, launching in Q1.

Law firm SJ Berwin has appointed Steven Fogel to its partnership board and as a non-executive director. Previously senior partner of Titmuss Sainer, Fogel led the law firm in its merger with Dechert, where he served as managing partner until June last year. Fogel is also a board member for London University and chairman of Uropharma, the medical device business.

Mark Boucher has rejoined Smith & Williamson Investment Management’s UK equity team. He returns as director, head of UK equities, and co-manager of the firm’s Enterprise fund. Boucher left the firm in 2009 to run UK monies for a US-based hedge fund.

Graham Wrightson has joined law firm Stephenson Harwood as pensions partner in their employment and pensions practice. He was previously partner and head of UK legal consulting at Mercer, the human resources advisory. Wrightson specialises in advising trustees and employers on pensions arrangements.

Shaun O’Callaghan has joined Grant Thornton as UK head of restructuring. With over 20 years' experience as an advisor, he was previously a senior manager at FTI Consulting, and lead partner for KPMG’s strategic and operational restructuring practice. The accountancy firm has also promoted Sarah Bell to Restructuring Partner.

Michael Brown and Martin Sandler have both been appointed partners of law firm Bird & Bird. Brown is a solicitor-advocate with 18 years’ experience in dispute resolution and joins from Jones Day. He has also worked for Citigroup and NatWest. Sandler specialises in regulatory and transactional work, and has previously held roles at NYSE Euronext and Merrill Lynch.

"Brexit" - British Exit from the European Union

Forza Winter Pop-up Rooftop Fonduta Restaurant is open until 02.02.2013. In a secret London location, all is revealed upon booking!

This weekend at Acklam Village Market you can see some fantastic musical acts, arts and delicious food.

The International London Ice Sculpting Festival is on this weekend in Jubilee Park. It is free to attend and everyone will have an opportunity to get involved!

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Wednesday, 9 January 2013

Will the Indian tiger roar again in 2013?

“India is not simply emerging, India has already emerged” (Barack Obama)

India in 2012 offered everything a keen Bollywood fan could ask for. The year opened with drama and suspense as the economy (the third largest in Asia) was struggling and government inactivity was stifling the market. Then, the political villains arrived to make the situation worse, leading to the much published corruption scandals which further dented market confidence. But – as ever in Bollywood – there was a happy ending and 2012 closed with the government intervention that was desperately needed. This came in the form of reforms in the retail sector, with Q4 showing improved growth rates and lower inflation which together provides renewed optimism for the sequel: 2013.

Economists’ growth expectation for India in 2013 range between 6-6.5% and much depends on the Indian government’s ability to implement further reforms in land, labour and tax. These reforms will provide a more investment-friendly environment and help renew the confidence in the country to help increase inflow of foreign investment into India, which I think will be the key driver of growth in 2013.

The budgets to be announced in February will be the Congress government’s final budgets before the elections in 2014. These will be key indicators of the government’s willingness to target long term goals. The budgets will set out planned spending on infrastructure, employment initiatives, key requirement which should all be positive signs for investment into the economy. The recent elections in key states of Utter Pradesh, Gujarat and Punjab in which Congress results were poor, show a shifting of power in the long term and the emergence of minor parties being favoured by the Indian public. There remains a concern that these budgets may, in effect, be used as a way of sweetening the poor voters who make up the majority of the voting population and could delay the removal of subsidies and further reforms. This would win back public confidence at the expense of market confidence.

The Indian economy does need a more competitive framework within key sectors which are projected to grow rapidly over the next few years. The retail sector (expected to see a £160bn food industry by 2015), Life science and healthcare (expected to grow to £40bn within the next three years), and the telecom market (which currently has 811.6 million wireless subscribers) all offer exciting opportunities for further development and will provide knock-on opportunities for supporting sectors of the economy. India is already home to world-class companies such as Bharat Forge, Tata Group, Mahindra, Reliance Industries and Infosys but competition from multi-nationals could help Indian corporations to develop further within this vast market by ensuring a more equal competitive environment. The multi-nationals will have the resources and expertise to target the key cities but also tap into the significant smaller cities and the rural markets, opening them for Indian companies.

International trade accounted for 53% of India’s GDP in 2012 and the slowdown in the global economy over the last few years has certainly impacted the country. However, with improvements in the Chinese, US and European markets already, India’s trading activity will certainly increase in 2013. During February, planned visits from UK Prime Minister David Cameron and French President Francois Hollande, demonstrate major Western economies have clearly identified the strategic benefit of engaging with India. Further collaboration between India and key markets will only enhance its position in the world market.

2013 for India is highly dependent on the Congress government and Manmohan Singh in particular to provide a final push to ensure that his vision for India continues well beyond 2013. Singh started this journey for India in 1991 and it is predicted that this year will be probably be his last in power so it is hoped he will go out in style. India needs to avoid building bridges that go nowhere, and continue with reforms which will ensure that she continues on her journey to become one of the giants of the world economy. In Bollywood films the villain never wins and I think the increasingly-informed Indian public will no longer tolerate political inactivity, so expect plenty more song and dance numbers.


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Frontier Markets are the new BRICs

“In essence, [frontier markets] represent what emerging market countries like Brazil, Russia, India and China were 20 years ago.” (Mark Mobius)

Pre-emerging markets are countries that have stock markets and form a subset of all Emerging Markets. They are often thought of as poor, under-developed countries but the reality is quite different. The less-established ‘Frontier Markets’ incorporate 25 countries across the globe, spanning Africa, the Gulf States, South America, Europe and Asia. These markets are typically pursued by investors seeking high, long term return and low correlations with more developed markets. As with the BRIC countries, these frontier markets are expected to continue to grow faster than the developed economies in 2013.

The 'African Lion'

Sub Saharan Africa economies are seeing rapid expansion with a growing entrepreneurial middle class, increasing political and economical stability, as well as a large resource base. While their growth and circumstances differ from so-called Asian Tiger economies of the past, taking into account the level of growth and resource wealth, perhaps these ‘African Lion’ economies will be another future success story. Nigeria, Kenya and Botswana are just a few of the African frontier markets to keep an eye on in 2013 and which should, to a degree, have a knock on affect on the rest of the continent. Botswana, for example, has relative control over its resources particularly its diamonds, while Nigeria and Kenya have an easier path to development due to their direct access to the sea and thus the ability to trade their resources without having to rely on a neighbour.

At the other end of the frontier market scale are the Gulf States. They are very wealthy due to their oil reserves but are still considered frontier markets because of heavy restrictions on foreign investments. If these are eased, the risks of investing in frontier markets like Saudi Arabia early could result in a large upside. As Allan Conway, Head of Emerging Market Equities at Schroders notes, countries like this will in fact, “leapfrog straight from a frontier market to a developed one.” Savvy investors will know that to benefit from the potential upside, they will certainly need to invest in the Gulf States before this leapfrogging occurs.

“The rapid advance of many frontier market countries toward emerging market status gives their investors economic opportunity for three main reasons: growth potential, valuations and correlation.”
(Mark Mobius)

Besides Gulf States, frontier markets also appear in other surprising areas, such as Europe. Croatia was outlined by Bloomberg as number 12 on its top 14 most exciting frontier markets of 2012. “Its stock market is cheap and inflation is low, however so is growth and more importantly their currency is highly volatile.” It is clear that there is no geographically binding factor compared with the Asian Tigers, but like the BRIC countries, perhaps the odds are in their favour now or in the not too distant future.

Risk vs. Reward

There are obvious reasons to be cautious about investing in frontier markets – by their very nature they are characterised by instability and poor liquidity. Pension funds for example, due to their risk adverse nature, would be understandably wary when it comes to investing in economically and politically fragile countries. However this has not stopped other investors recognising the opportunities for growth. Mark Mobius, Executive Chairman of Templeton Emerging Markets Group commented on his Emerging Markets blog post that “despite the psychology of risk aversion that has seized financial markets since the euro zone crisis erupted, money has been pouring not only into emerging equity markets but even into the newer and smaller frontier markets.” It is clear that for some, these risks are worth taking in order to benefit from the potential returns on offer.

Predictions are very hard to make, especially in the case of Africa when one must consider its hugely varied demographic withheld in colonial boundaries and its recent history particularly surrounding the reliance on aid and rise of dictators in a number of countries. However in my opinion, the risks – when carefully assessed – are worth taking in terms of the potential gains from investing in frontier markets, as was the case with investing in the BRIC economies a few decades ago. With countries like Qatar possibly to soon make the leap from frontier to developed market and the predicted growth of Sub Saharan Africa, frontier markets will attract significant investment. This will hopefully improve stability, further reducing risk. However in time the development of these markets may result in a decline in gains, so the prime time to act and invest may be with us sooner than we think.


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Friday, 4 January 2013

Abchat Weekly Wrap Up: Common sense prevails the fiscal cliff

US President, Barack Obama called for a ‘little less brinksmanship’ the next time that the politically conflicting legislature of the US government has to come to an economic agreement to avoid a fiscal cliff. Whist the World watched in anticipation to see if party politics were going to send the global economy into further meltdown, it was a big relief to see that common sense prevailed.

Party politics could have ruined the crucial vote in the US on Tuesday and subsequently the World economy, however the Republican majority House of Representatives resulted in 257 votes to 167 in favour of raising tax for the wealthy and delaying spending cuts for two months.

On Wednesday morning financial markets responded well to the decision; with Hong Kong's Hang Seng index opening up 2.1% on Wednesday morning, while South Korea's Kospi added 1.7% and Australia's ASX 200 rose 1.2%. In Europe, UK shares jumped 1.5% on opening, German stocks gained by 1.6%, while France's Cac 40 rose 1.4% and Italy's much battered stocks gained 2%.

The World’s immediate response to this is very encouraging however it highlights the significance the US economy has on global matters. It is reassuring to see that for once US politicians decided to “focus not on politics, but on what’s right for the country”, as stated by Barrack Obama.

1. The US fiscal cliff is averted as the Senate finally agree a new legislation, which saw the approval of a bipartisan budget deal.

2. Hopes are high for the
2013 IPO pipeline: with the current equity markets performing strongly and volatility levels considerably lower, analysts keep broadly optimistic with the environment in driving IPO volume

3. Switzerland’s oldest bank,
Wegelin, is to close permanently. The Company, who also face £36m in fines to US authorities, admitted to helping over 100 American’s evade taxes totalling over £1.2bn.

Twitter is hotly tipped for an $11bn flotation in 2014, according to analysts at Greencast. With a market valuation based on the trading of unofficial shares on the secondary market and the Company firming up its management team, it looks as if it could be ready to tackle the public milestone.

5. STOCKWATCH: Equity markets lifted on announcement of US Fiscal Cliff deal, with Banks and Mining leading the
‘top riser’ commodities on the FTSE 100. The news pushed the FTSE past 6000 points and helped add £33bn to the value of Britain’s top companies.

January is traditionally a time for a fresh start. Beginning 2013 in a new role will be Michael Dyson who joins Numis as Managing Director, Head of Fixed Income Products. Dyson joins from Investec. Clearwater Corporate Finance has brought in David Burton to manage its debt advisory team. Burton was previously a manager in the corporate division of Clydesdale and Yorkshire Bank.

Jamie Barklem has joined Grant Thornton as an Associate in the Corporate Finance team. Jamie joins from Daniel Stewart where he was a Corporate Finance Executive.

Law firm Fox Williams has strengthened its team with the appointment of Peter Ashford as a partner in its litigation and arbitration practice and has also appointed four new associates.

Taylor Wessing has promoted Keith Barnett from Head of Real Estate to Business Group Director covering real estate, finance, insolvency, construction, environment and planning.

With half the City still on holiday, our full networking programme won’t kick off till next week when we are looking forward to hosting our first Market Lunches of 2013!

"Takeunder" - An (accepted) offer to purchase/ acquire a publicly traded company where the offer price per share that is significantly less than its market value.

This weekend is your last chance to skate on the ice rinks at Westfield Stratford, Tower of London, Hampton Court, Somerset House and the Natural History Museum.

Wildlife photographer extraordinaire, Roger Hooper's Art in the Wild exhibition is a must-see this January at the Oxo Gallery on the Southbank, in aid of the WWF-UK.

Following the success of their summer show,
Cabaret Mechanical Theatre is performing their interactive contemporary automata show at Space Station Sixty-Five this weekend.

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